Petroleum history, United States

An oil refinery, Shell at Martinez, California. The tapering vertical elements are smokestacks to create draft for heating units. Most of the complex vertical units are fractionating towers. Others are flares. (Source: Wikimedia Commons, Leonard G.)

Introduction

The Phillips well, on the right, and the Woodford well, on the left, located in the middle of Oil Creek Valley, Pennsylvania (note the river at the right of the photograph). The Phillips well was the most productive ever drilled to date, flowing initially at 4,000 barrels per day in October 1861. (Photo: Drake Well Museum, Pennsylvania Historical and Museum Commission)

The intricacy of petroleum to American life in the early 21st century would have shocked 19th century users of "Pennsylvania rock oil." Most farmers who knew about oil in the early 1800s saw seeping crude oil as a nuisance to agriculture and water supplies. These observers were not the first people to consider the usefulness of petroleum, which had been a part of human society for thousands of years. However, its value grew only when European-Americans offered the resource their commodity-making skills.

Crude oil was found and used in some fashion in various locales throughout the world. However, the area credited with first noticing petroleum is a mountainous area in western Pennsylvania, nearly one hundred miles north of Pittsburgh. The oil occurring along Oil Creek was named initially for the Seneca people, the native inhabitants of this region of North America at the time of European settlement. However, there were earlier users of this same supply.

Discovery and Early History

Northwestern Pennsylvania had served as a temporary home to the mound-builder society living centuries prior to the Seneca. Paleo-Indians of the Woodland period, before 1400 AD, ventured from their original homelands in the Ohio Valley and along the Great Lakes on frequent journeys to Oil Creek, where they collected oil on a fairly large scale for use in their religious rituals. Although no written accounts remain, it was well known that initial European explorers in the area found long, narrow troughs that had been dug along Oil Creek. Early use of this crude oil resource reveals interesting contrasts between Native American and European cultures. The Seneca skimmed the oil from the water's surface, using a blanket as a sponge or dipping a container into the water, and then used the collected crude oil as ointment or skin coloring. European explorers designated this Pennsylvania stream as Oil Creek beginning in 1755. Tourists and soldiers passing through the area were known to soak aching joints in the surrounding oil springs, and even to imbibe the crude oil as a castor oil variation.

As the reputation of the oil and its value grew, settlers in the region constructed dams of loose stones on their property to confine and gather the floating oil from springs. In the mid-1840s, one entrepreneur, Samuel Kier, noticed the similarity between the oil prescribed to his ill wife and the annoying substance that was invading the salt wells on his family's property outside Pittsburgh, Pennsylvania. Kier began bottling the substance in 1849 and marketed it as a mysterious cure-all available throughout the northeastern U.S. Although he still acquired the oil only by skimming, Kier's supply quickly exceeded demand because of the constant flow of oil from his salt wells. With the excess supply, he began the first experiments to use the substance as an illuminant, or a substance that gives off light. With this and other developments, the culture of expansion and development was beginning to focus on petroleum as a valuable resource.

The discovery of petroleum's usefulness to the birth of the industrial age required the influence of those outside of the oil-rich Pennsylvania region. Dr. Francis Brewer, a resident of New Hampshire, traveled to Titusville, Pennsylvania in 1851 to work with a lumbering firm of which he was part owner. During the visit, Brewer entered into the first oil lease ever signed with a local resident. Instead of drilling directly for oil, however, Brewer merely dug trenches to convey oil and water to a central basin. Upon his return to New England, Brewer left a small bottle of crude oil with Dixi Crosby, a chemist at Dartmouth College, who then showed it to a young businessman, George Bissel.

Petroleum's similarity to coal oil immediately struck Bissell. He signed a lease with Brewer to develop the petroleum on the lumber company's land, but before the operation could begin, Bissell needed to attract financial backing of $250,000. This would not be easy since neither he nor anyone had yet recognized the extent of petroleum's utility, although some of the risk could be assuaged by scientific explanation of petroleum, still a curious substance to many. Benjamin Silliman, Jr. of Yale University provided some of this scientific backing in a report released in April 1855. Silliman estimated that at least 50 percent of the crude oil could be distilled into a satisfactory illuminant for use in camphene lamps, and that 90 percent of the distilled products held commercial promise. On September 18, 1855, Bissell incorporated the Pennsylvania Rock Oil Company of Connecticut, the first organization founded solely on the speculation of the potential value of the oil beneath and around the Oil Creek valley.

From this point forward, petroleum's emergence became the product of entrepreneurs—except for one important character: Edwin L. Drake of the New Haven Railroad. In 1857, the company sent Drake to Titusville, Pennsylvania to attempt to drill the first well intended to recover oil. The novelty of the project soon wore off for Drake and his assistant, Billy Smith, and due to Drake's failures, the townspeople irreverently heckled the endeavor one of a "lunatic." During the late summer of 1859, Drake ran out of funds and wired to New Haven, Connecticut for more money. He was told that he would be given money only for a trip home—the Seneca Oil Company, as the group was now called, would no longer support him in this folly. Determined, Drake took out a personal line of credit to continue his exploration and, a few days later, on August 27, 1859, he and his assistant discovered oozing oil.

After the American Civil War, the petroleum industry made continual technological advances that allowed it to emerge as society's major source of energy and lubrication during the twentieth century. The immense potential of petroleum resources and applications became evermore apparent, attracting the interest of one of the most effective businessmen in history, John D. Rockefeller. Working within the South Improvement Company for much of the late 1860s, Rockefeller laid the groundwork for his effort to gain absolute control of the industry, covering each phase of the process. Rockefeller formed the Standard Oil Company of Ohio in 1870. In the early 1870s, oil exploration in Pennsylvania's Oil Creek region grew significantly, and the effort would expand to other states and nations during the next decade. By 1879, Standard controlled 90 percent of U.S. refining capacity, as well as the majority of rail lines between urban centers in the northeastern U.S. and many leasing companies at various sites of oil speculation throughout the country. Due to Rockefeller's efforts and developments, petroleum became the primary energy source not only in the U.S., but for societies around the world.

Defining Modern Business

John D. Rockefeller and Standard Oil first demonstrated the potential market domination available to those who controlled the flow of crude oil. Rockefeller's system of refineries had grown immensely by the close of the nineteenth century, allowing him to demand lower rates and eventually even kickbacks from rail companies that transported his products. One by one, he drove his competitors out of business, making Standard Oil into what observers in the late 1800s called a "trust" (today known as a monopoly). Standard Oil's reach extended throughout the world, making it a prominent symbol of the "Gilded Age", when businesses were allowed to grow unregulated, benefiting only a few wealthy parties; reformers vowed things would change.

President Theodore Roosevelt, who took office in 1901, led the Progressive Party's interest in involving the federal government in the monitoring and regulation of the business sector. In the late 1890s, "muckraking" journalists wrote numerous articles and books exposing unfair and hazardous business practices in the U.S. Ida Tarbell, an editor at McClure's Magazine, who had grown up the daughter of a barrel maker in Titusville, Pennsylvania took aim at Rockefeller. Her work, The History of the Standard Oil Company, published in 1904, produced a national furor over the company's unfair trading practices. President Roosevelt used information in Tarbell's book to enforce anti-trust laws, eventually resulting in Standard Oil's dissolution in 1911. Rockefeller's company had become so large, that when broken into subsidiaries, the pieces would themselves become giants—Mobil, Exxon, Chevron, Amoco, Conoco, and Atlantic among others.

Even after Standard Oil's dissolution in 1911, the image of its dominance continued. Standard had led the way in international oil exploration, suggesting that national borders need not limit the oil-controlling entity. Throughout the twentieth century, large multinational corporations or singular wealthy businessmen attempted to develop petroleum supplies and bring them to market. In the 1960s, nations around the world would draw from Rockefeller's model to devise a new structure. Massive international companies managed the import and export of oil regardless of the resource's nation of origin. The importer—often companies in Western, industrialized nations—was, in many cases, most in control of supply and demand and, therefore, prices.

This situation began to shift in the late 1950s. The Eisenhower Administration implemented quotas on the import of crude oil. Quotas—that determined only a specified amount of oil could be imported from outside the country—were designed to protect the sale of domestic oil. Established in 1959, such quotas would infuriate global oil-producing countries throughout the 1960s. By September 14, 1960, a new organization was formed to eliminate the practice of companies making money by extracting oil around the world—the Organization of the Petroleum Exporting Countries (OPEC). OPEC had a definitive objective—to defend the price of oil—and would from this point forward insist that companies consult with them before altering the price of crude oil. They also committed themselves to solidarity, and aspired to reach a day when oil companies and Western nations would come to them to negotiate.

A Truly Global Commodity

OPEC's five founding members—Iran, Iraq, Kuwait, Saudi Arabia and Venezuela—were the source of over 80 percent of the world's crude oil exports. These members argued that its formation represented a shift of control of natural resources to the states or nations in which they were located. Despite such proclamations, OPEC wielded little united power in its early years. While OPEC's existence ensured that companies would not act without consultation, political power had not yet been mobilized.

During the coming years, OPEC would gain political clout through independent activities, but power was also based upon America's dependence on fuel. Between 1948 and 1972, consumption in the U.S. grew from 5.8 to 16.4 million barrels per day. While significant, this three-fold increase was greatly surpassed by societies in other parts of the world: Western Europe's use of petroleum grew sixteen-fold and Japan's 137-fold. This global increase in fuel consumption was tied to the automobile; worldwide automobile ownership rose from 18.9 million in 1949 to 161 million in 1972. The United State's contribution to this growth was significant—an increase from 45 million to 119 million in little more than two decades. Although new technologies enabled some refiners to increase the yields of gasoline, diesel, jet fuel, and heating oil from a barrel of petroleum, the needs remained unlike anything the world had ever seen.

Such reliance on fuel forced the U.S. Federal government to consistently question energy-related policies. In 1969, the administration of President Richard Nixon renewed debate over the quota program. In April 1973, President Nixon delivered the first-ever Presidential address on energy, in which he announced his decision to abolish the quota system, then-capping the import of crude oil into America. Without the import barriers, the United States was a full-fledged, though very dependent, member of the world oil market; by the summer of 1973, American imports of petroleum had doubled.

In 1973, petroleum became a tool of diplomacy. The "Arab Oil Embargo" of 1973 fed national panic, which contributed to a 40 percent increase in the price of gasoline. Lines for the purchase of gasoline and stations with empty tanks became common sights; "Sorry, No Gas Today" read signs in front of many stations. The crisis required rationing and cultural changes by the American public. The Embargo became a resounding lesson of "living within limits" for many Americans. Throughout the 1970s, this recognition began to define the modern environmental movement's ideas concerning the need of conserve natural resources. In terms of world power, the equation had been permanently altered. Even following the Embargo, a stable supply of crude oil had been placed undeniably within "matters of national interest."

But American consumers showed a great ability to overlook the lesson of limits. Consumption of petroleum continued to rise through the end of the 20th century. Even in the early 21st century, when prices rose to record highs, Americans continued to live a lifestyle based on the perception of cheap oil. As oil companies search for new supplies and consumers begin to realistically consider alternative methods of powering automobiles, most scientists agree that the petroleum age will near its end by 2050. Modern technology allows us to account the timing of this event rather precisely: we have consumed 800 billion barrels during the petroleum era; we know the location of 850 billion barrels more, termed "reserves"; and we expect that 150 billion barrels more remain undiscovered. Simply, there is an end in sight, spurring the need for the development of new energy sources.